Germany shareholder loans and upstream mergers | KPMG | GLOBAL

Germany: Shareholder loans, upstream mergers, tax groups

Pre-2008 loans in Germany

The federal tax court (BFH) decided a case concerning the write-down of loan receivables due from foreign related companies. The case concerns a tax year prior to 2008—when German tax law was amended to provide that profit reductions relating to domestic and cross-border shareholder loans between corporations are no longer tax deductible and that an off-balance sheet adjustment is required.


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The taxpayer (a German limited liability company) in 2000 made a loan to its wholly owned foreign subsidiary, with interest at an annual rate of 5%. Because of poor performance, the foreign subsidiary ceased operations in October 2002. Accordingly, for 2002, the taxpayer wrote down the loan to €0 (write down to the lower going-concern value). At issue was, as the German tax authorities asserted, whether the write down to the lower going-concern value would be allowed because in the group structure, the loan was “recoverable.”


Read an October 2015 report [PDF 1.68 MB] prepared by the KPMG member firm in Germany: German Tax Monthly (October 2015)


Other topics discussed in this KPMG report concern:

  • A lower tax court of Hamburg decision on retroactive taxation of type II gain on contribution, after an upstream merger
  • Guidance on tax groups for corporate income tax purposes and atypical silent partnerships

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